On June 29, 2026, the PRC Supreme People’s Court officially released the Judicial Interpretation (II) on Issues Concerning the Trial of Construction Project Construction Contract Disputes (the “Interpretation II”). Interpretation II took effect on June 30, 2026.
I. Background
Interpretation II serves as a systematic update to construction-industry adjudication rules. It addresses widespread market irregularities, including affiliation contracting, illegal subcontracting, and violations of tendering related rules. In addition, Interpretation II establishes a coordinated disciplinary mechanism that integrates civil adjudication with administrative enforcement and criminal oversight. All-together, these reforms are expected to reshape transactional practices, compliance standards, and dispute-resolution expectations across the construction industry.
II. Core Legislative Revisions and Impacts
Below is an overview of the core content and impact of the Interpretation II.
III. Our Conclusions and Suggestions to Project Owners
- Closely Monitor the Practical Impacts of Regulatory Developments
Multiple revisions introduced by Interpretation II have practical implications on the construction industry, including but not limited to post-termination site and document handover, the tradability of contractor's statutory priority claims, and the allocation of quality defects' repair costs.
Taking the allocation of quality defects' repair costs as an example, Interpretation II imposes stricter conditions on owners’ rights to claim compensations for quality defects. In particular, if owners want to seek for compensation against contractors for quality defects or exercise their right to draw a quality guarantee when the contractor refuses to repair after having received the notification of the owner, the owner must first carry out the repair work by themselves in order to claim such compensation against the contractors. Courts may closely scrutinize the reasonableness and actual incurrence of the claimed expenses. Accordingly, owners should retain adequate records of repair notices, repair works and related payments. On the other hand, contractors shall respond promptly to repair requests and preserve evidence of completed remedial works, in order to minimize compensation.
Both contractors and owners should closely monitor the practical implications of these regulatory developments and adjust their project administration and dispute management strategies accordingly.
- Pay Attention to Migrant Worker’s Wage Claims
Article 8 of Interpretation II provides an independent litigation channel for migrant workers to claim advance payment and full settlement of outstanding wages directly against owners, general contractors and subcontractors, which fully enforces the liability rules under the Regulations on Ensuring Payment of Migrant Workers’ Wages from a civil judicial perspective.
Both owners and contractors shall strengthen supervision over subcontractors’ wage payment to avoid joint civil liability triggered by outstanding wage claims.
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